| |
Few topics confuse investors more than figuring out what
estate-related documents they need. Living Wills, Living Trusts, and
Powers of Attorney are just a few of the terms that most find hard
to define, let alone understand. But being comfortable with these
terms and what each one can do for you is important, and can make
the difference between your wishes being followed or creating a
nightmare.
A Living Will is a document that is designed to convey your
end-of-life wishes regarding medical care. Many people have strong
feelings about being kept alive by machines and feeding tubes. The
Living Will allows you to express your ‘will’ concerning your
end-of-life preferences. Please note that the Living Will doesn’t
give any other person the right to make medical decisions on your
behalf.
A Living Trust, on the other hand, has nothing to do with
end-of-life medical decisions. A Living Trust is a vehicle that
controls the management of your assets while you are alive and how
they are distributed after your death. Plus, the assets owned by the
Living Trust don’t have to go through probate before they are
transferred to your heirs. (Go to www.guardingyourwealth.com for
more articles on Living Trusts.)
So how should a Living Will and a Living Trust apply to you? Every
adult should have a Living Will, regardless of age. A great deal of
stress and potential conflict is removed from your loved ones when
you clearly state your end-of-life wishes. But not every adult needs
a Living Trust.
For those with very simple estates consisting of a home and a few
other accounts, proper account registration and transfer-on-death
provisions can solve most estate problems. But if you have
out-of-state property, are remarried, have children with special
needs, or otherwise wish to simplify the settling of your estate for
your those you leave behind, then a Living Trust is something you
should look into.
Another very confusing topic concerns Powers of Attorney. Here is a
simple way to understand how they work in general. An attorney is
someone who acts on your behalf. A Power of Attorney, then, is just
a way for you to legally name who you want to act in your behalf.
You determine when that person can act on your behalf. They can do
so immediately, only if you should become incapacitated, or both now
and during incapacity. A Power of Attorney is only in force while
you are alive.
For most estate planning purposes, you need two important Powers of
Attorney. The first is a Medical Power of Attorney. This allows you
to choose who will make your medical decisions should you become
incapacitated. Only your spouse has this authority without such a
document. But what if something happens to your spouse, or you’re
single? This document can relieve a lot of headaches in these
situations.
The second Power of Attorney you need is a Durable Power of Attorney
for Assets. Not even your spouse can make financial decisions for
you if you’re incapacitated. This important document lets you
predetermine who can manage your assets when you are no longer able
to do so yourself. Without this document, should you develop
dementia or end up in a coma, someone would have to petition the
court to be appointed your guardian. This process is expensive,
extremely stressful and completely unnecessary, if you have a
Durable Power of Attorney for Assets in place.
It’s important to remember that these Powers of Attorney can be
worded so they only become active should you become incapacitated.
While you’re competent, you regain complete control.
So every adult should at least have a Living Will, a Medical Power
of Attorney and a Durable Power of Attorney for Assets. Many times
you can get the forms for a Living Will and even a Medical Power of
Attorney free of charge at your local hospital. All you have to do
is fill out the form and sign it in front of two witnesses. In some
states you may have to have it notarized.
A Durable Power of Attorney for Assets should only cost around $100
and can be done by any attorney. There are even kits available
online for those do-it-yourselfers.
Have a financial question? Send me an email and I’ll personally
respond, free of charge. Go to www.guardingyourwealth.com and click
on ‘Ask Jeff’.
In addition to being a nationally syndicated columnist and Certified
Financial Planning Practitioner, Mr. Voudrie provides personal,
private money management services to clients nationwide. |
|
